AMD Spins Off Manufacturing Capacities into The Foundry Company.

Advanced Micro Devices on Monday officially closed its manufacturing-capacities spin-off deal and become fabless chip manufacturer. The move will allow the company to stop investing into new leading-edge foundries and process technologies, but will also mean that the company will cease to be fully-integrated chipmaker and will have to rely on manufacturing capacities owned by The Foundry Company.

“With the close of this historic transaction, AMD and its committed partners have conceived two strong industry-leading companies capable of charting future courses that will dramatically improve the technology industry,” said Dirk Meyer, president and chief executive officer of AMD.

Manufacturing capacities of AMD from now on will belong to the company temporarily known as The Foundry Company (TFC). AMD will own approximately 34.2% and Advanced Technology Investment Company (ATIC) will own approximately 65.8% of TFC’s fully-converted common stock. Still, AMD and ATIC will each have equal voting rights at the close of the transaction. ATIC’s fully converted ownership may increase over time based on the differences in securities held by AMD and ATIC, and depending on whether AMD elects to invest proportionately with ATIC in future capital infusions to support The Foundry Company’s growth.

TFC has a total enterprise value of approximately $4.3 billion, consisting of AMD's contribution of manufacturing assets and liabilities, (including its fabrication facilities in Dresden), intellectual property and employees valued together at approximately $1.8 billion; ATIC's contribution of $1.4 billion in new capital; and approximately $1.1 billion of debt assumed by The Foundry Company from AMD;

AMD received $700 million from ATIC for a portion of its ownership interests in TFC, the latter assumed responsibility for the repayment of approximately $1.1 billion of associated AMD debt, and Mubadala Development Company of Abu Dhabi paid AMD approximately $125 million for 58 million newly issued AMD shares and warrants for 35 million additional shares. As a result, AMD improves its cash position by approximately $825 million and will appoint a Mubadala designee as a member of its board of directors.

AMD claims that by spinning off its manufacturing capacities it not only reduces its spending on new fabs and process technologies dramatically, but also enables the whole industry to take advanced of its forty years of expertise in semiconductor manufacturing.

“Our ‘Asset Smart’ strategy is about more than providing AMD with long term access to world-class, leading-edge semiconductor manufacturing that is foundational to our growth strategy. It is about transforming the industry. ATIC is the ideal partner to help scale AMD’s forty years of semiconductor expertise, and provide a manufacturing foundation for the entire industry to produce the next generation of semiconductor innovations,” said Mr. Meyer.

The Foundry Company will operate fabs in Dresden, Germany and will eventually build a fab in New York, USA. The company will use microprocessor-specific process technology to product AMD’s central processing units as well as bulk fabrication process to make chips for other developers, including ATI, graphics products group of AMD.